### Radio New Zealand News Updated at 4:08pm on 27 April 2009Dunedin mayor signs contract to build stadium
Dunedin Mayor Peter Chin has signed a contract for the construction of the city’s stadium. The $165 million contract with Hawkins Construction means work can start at the Awatea Street site in May.RNZ Link

****

### Channel 9 News April 27, 2009 – 7:24pmLegal Contract of the Forsyth Barr Stadium signed
The legal contract between the Dunedin City Council and Hawkins Construction for the construction of Forsyth Barr Stadium at University Plaza was signed this afternoon. Mayor Peter Chin put pen to paper during a DCC Extraordinary Meeting today.Video Link

Paul, you confirm my point. The 02 millennium stadium has been closed for more years than it’s been open in the decade since it was built, it been liquidated once, lost literally billions of dollars in public funds, and has had less than two years of successful operation in a decade, and even then is closed for nearly half of that time.

And it has a population ONE HUNDRED times that of Dunedin to support it.

And despite all this, in your mind this is an example of success. What’s your definition of failure?

The payback time of 3009 is arrived at by using the CSTs own figures of $200,000 profit per year for the stadium (ONLY if there is a 10,000 spectator increase for every super 14 game, and only if the forecast number of people come to the forecast number of soccer games, other sports events and concerts). The CST figure of $200,000 annual profit is 1/1000th of the CST figure for the cost of the stadium, so the stadium will take 1000 years to get to a break even.

Of course if you count interest in this, you have to add another 1000 years, except that annual interest costs alone are 37 times the annual profit. Effectively the longer the stadium is open, the further in debt it will get, unless ratepayers throw millions of dollars per year into the stadium debt vortex (for no return)

David, we’re not getting anywhere here and I’m one stubborn SOB, so please let’s not play this dance.

As it stands now the O2 Arena is a stunningly successful events centre. As I have stated (and this simply isn’t getting through) irrespective of it’s colourful past, the current EVENTS MANAGEMENT PLAN/TEAM is wonderfully successful, the point being that a stadium like that can be run profitably. You are quite wrong in claiming that it’s been closed more than half it’s time in it’s recent incarnation. The O2 Arena has not been closed for one out of the last two years, that is simply false, so excuse me if I find the rest of your claims somewhat palatable with one hell of a pinch of salt.

The O2 arena housed within The O2 (the old millenium dome) is “the third most popular venue in the world for concerts and family shows”, if we are to believe wiki (which of course we take with a pinch of salt, but always a good place to start).

My whole argument is pretty bloody simple really. Our new Carisbrook thus far is on budget, on time and thus far not operational. When it is completed on time and budget, then it is the duty of the EVENTS Management Team (much like VBase in CHCH) to see this is a successfully run operation. There is every chance this will be the case and to claim otherwise is disingenuous, or let me borrow your crystal ball, I want to see the lotto tickets tonight I have an Aston Martin I want to win, because you can’t simply predict doom and gloom, or I can predict outrageous success – either of which we can do.

As for the 3009 claims, please go to the Prime Minister, the UN or the Privy Council with these claims, they are astounding, they are outrageous, they are a national disgrace – take from that sarcasm what you want, as I said, I’m one hell of a stubborn SOB, with a touch of arrogance.

The O2 stadium went into liquidation and closed in 02, reopened in June 07. Since then it opens seven months per year. As I said – closed OVER half the time it has been built, and NEARLY half the time since it’s re-opening.

And the public lost billions.

My arguemnt is using the very optimistic spectator numbers and events schedule from CST, the stadium cannot pay for itself – the forecast return (BY CST) is just 1/1000th of it’s cost.

It’s not surprising that a mathematician has a look at the new stadium and realised the figures just don’t add up. (just like it was a mathematician who had a bit of a look at the recent $50billion Madoff swindle – and was the first to realise that things just didn’t add up).

An average cost of $4000 per household (for half of the stadium – $100m + interest) for a facility where above 75% of residents will never use, making a subsidy from ratepayers of $30 – $100 every time someone sits on a stadium seat, where 90% of the benefit of the new stadium is derived from the current stadium, etc etc etc

The numbers just don’t add up. It’s just not financially feasible. Even if the wildly optimistic numbers from CST come true, it just does’t make any financial sense to gamble $200,000,000 for a slim chance to get a return of 1/1000th.

David, as I said, I’m one hell of a persistent SOB, The Millenium Dome is not The O2, pre and post new management and facilities are not one in the same.

We can only talk of The O2 post opening in 2007. In 2007 it was open for 7 months, subsequently it has been open much more, and if you are to go to The O2 web site, you will see the list of concerts and events at the place is massive, Michael Jackson, Tina Turner, Little Feat, Enrique Iglesias, Beyonce, Depeche Mode, 10CC, Madonna, James Taylor, Pearl Jam, Cliff Richard and The Shadows, the list goes on and on, and there is no sign of it being shut this year, indeed to claim it will be is once again disingenuous. You in fact have to go out as far as Feb next year to see the final bookings at this stage. You are playing Dr Hamlins game of being weak or fickle with the truth, you are choosing to look as something that has been, and not what actually is the truth here and now.

This is all Irrespective of population size, just look at Vector arena AUK, we don’t have the same economic imperatives as they do, our goals are much more modest and quite achievable.

You know I still just don’t buy your figures either, I’m hoping the mathematician you are talking about is Bev, it’s well known that she is well stark raving mad.

Interesting that so much is being made of the job creation brought about by the stadium project getting the green light. The wage content of the contract has been suggested as around $50 million. I would concede that for those who get the wages it is good news.

But let’s not fool ourselves that this in itself is for the greater good of Dunedin. Just consider for a moment where the money for these wages is coming from. Something which in the euphoria seems to be overlooked. Quite simply, it will come from the interest bearing debt being raised by the DCC and the ORC.

So, in essence we rate payers are to pay through our rates the interest and capital of that debt over many years – long after the wages stop – to pay the people to construct an edifice that the majority of citizens don’t want.

Therefore, the wages add nothing to the local economy, it is simply what is known as internal churn. The real factor is that eventually the borrowed money plus interest content will be exported from Dunedin to the money lenders. We will be left with a hugely uneconomic structure woefully overbuilt for Dunedin’s population base.

Paul – I talk of a $200m project with just a 1/1000th return of $200,000 per year, and you say you don’t buy my figures.

What you are actually saying is you don’t buy the Carisbrook Stadium Trust figures (they are their figures – not mine).

Maybe we can agree on something – I don’t believe their figures either – the $200m project cost misses out at least $100m in interest, and the mere $200g profit is relies on highly optimistic crowd numbers, when crowds everywhere are plummeting – the real figure will me massive losses, especially once you take out their corporate box revenue (which is counted as both capital funding then again in operating revenue).

Whether David wants to believe “the financials or not”, the actuals are not a matter of opinion.

It is an absolute myth – and a mischievous one – that things have been “hidden”. The information is all publicly available for those who take the time to “do their homework”.

They have been explained on several occasions and are set out in last year’s Annual Plan and this year’s Draft Community Plan 2009-19 (page 11 of Volume 1). They have been twice audited by Audit NZ and more recently, unsuccessfully challenged in the High Court.

They are accepted by all councillors whether they agree with the stadium or not.

So, let me again record – but in more detail and as simply as I can – how the project is being financed.

The Council will fund the construction of the stadium by loan. Interest during the construction phase will be capitalised as is normal for capital projects of this size.

When construction is completed; the ownership of the stadium will transfer to Dunedin City Venues Limited, a council-controlled company. The model for this is Christchurch’s V-BASE.

At the time DCVL assumes ownership, it will take out a loan of $105 million to repay Council. The DCVL loan will then be serviced and repaid over 20 years by the collective cash flows of the council-owned companies.

Or, as Athol Stephens, General Manager, Finance and Corporate, DCC, put it in an interview with David Loughrey in the ODT on 18 January: “The company would pay for the stadium by raising debt from Dunedin City Treasury, which the council would receive and use to pay off the debt it raised during construction. Dunedin City Venues Ltd would hold the debt, sit inside the council’s group of companies, and make a loss when interest expense and depreciation were taken into account. The losses it incurred would be offset against the profits of the other companies. That loss was estimated to be $5 million a year, which would translate to $66 a year for the average household. “There’s nothing else” in terms of costs to ratepayers,” he said.”

This translates to the oft-quoted rate (make-up) of $66 a year as part of the General Rate for the average residential property, and $57 for the median residential property.

This is spread over the three categories of ratepayers: residential, non-residential and farmland.

As the distribution of the “dividend” is apportioned on the same ratio of the General Rate as the Stadium Rate is proposed to be collected, non-residential (commercial) and farmer ratepayers benefit proportionately.

How it all works is easily checked on the Rates Calculator available on the DCC website at http://www.cityofdunedin.co.nz. On the calculator, enter the rateable value of a property, e.g. $450000 (without the comma), check the rating category and click ‘calculate’.

In addition to the breakdown of how the rate income is spent, it is interesting (indeed a revelation) to check the real rating level and how much this is offset by the dividend/investment income.

If the 2009-10 budget is confirmed, the average residential property owner will receive an increase in dividend income of $42 over that received in the 2008-09 year. It could therefore be argued that the Stadium Rate is really only $24! Arguably.

To summarise: the $66 (or whatever the rate for a property is) will show as a direct ratepayer contribution over the next two years until DCVL takes ownership of the stadium.

After that, the requirement is to make up the $5 million shortfall in the “dividend” that council will receive from the Council Group of companies over 20 years.

Thanks for that Richard – however there are still the same two problems there’s always been.

You can’t have a $105m loan, paid back over 20 years with interest (around $200m total using the normal 7.5% interest) for just $5m per year. It will needs over $10m per year.

You can charge me $250 per year, or $66 and take away $184 of my subsidy – it makes no difference to me.

You can charge me $66 and take away $184 of any new additional subsidy I would have got.

Or you can charge me nothing and take away $250 of existing or new subsidy.

The real cost to me is the same – and council and CST have failed and failed and failed to tell me what that real amount is. So when they are trying to trick me like this, why would I trust anything they tell me now?

“At the time DCVL assumes ownership, it will take out a loan of $105 million to repay Council. The DCVL loan will then be SERVICED and repaid over 20 years by the collective cash flows of the council-owned companies.” NOTE: Servicing includes the interest.

“After that, the requirement is to make up the $5 million shortfall in the “dividend” that council will receive from the Council Group of companies over 20 years.” NOTE: The ratepayer requirement is simply to make up the $5 million. Nothing else.

Richard – clearly a $100m loan will cost a lot more than $5m per year to service.

The rest of the money comes from council companies, as you say.

So dividends that would normally subsidise our rates will instead go to the stadium. So the real cost to ratepayers is much more than $1320 each – probably double. And the real cost to the average commercial building owner is not $13,000 – more like double.

So again the true cost is hidden secretly away.

It’s so blatantly obvious that ratepayers are being conned about the true cost.

Effectively your statement backed up what I was saying. We pay $5m in extra rates, and lose millions in dividend subsidies.

And in the very likely event that the stadium runs at a loss – we fork out more, and if there are cost over runs, we fork out more.

Even without this it comes in at about a million dollars of our money for every rugby game that is played.